THE BLOG
06/20/2014 01:11 EDT | Updated 08/20/2014 05:59 EDT

5 Steps to Increase the Price of Your Product or Service

One of the fastest ways to grow your revenue and income is to increase the price of the product or service you offer.

Ruben Gamez, founder of Bidsketch, saw a doubling in his revenue from offering higher priced plans to users of his proposal creation software.

At Consulting Success we experienced a 400 percent increase in our revenues when we launched higher priced training and coaching programs to our community of global consultants.

Results like these are not uncommon. Yet increasing prices is still a topic many business owners shy away from even though the benefits are clear.

The most common reason is the fear of lost business, and this comes in two forms. Fear of angering existing customers and losing them. And fear of losing new potential business because your pricing is too high.

What most business owners don't realize is that they are losing money every day they don't raise their prices.

Here are five considerations that will make transitioning to higher prices a success:

Perception. How does your price position you in the marketplace? Do you want to be seen as the cheapest provider of your product or service? Price is a powerful way of setting your positioning and differentiation. Neil Anderson, in his book Don't Just Roll the Dice, suggests that to successfully increase your prices, ensure that you change the perception of what you're delivering. Customers will look at alternatives and options from other companies. If you're charging more ensure that the additional value you will provide is clear.

Options. Instead of providing your customers with a single price point for your product or service, give them options. Not all customers are the same. When you offer only one option, you're essentially telling your customers "Here it is, take it or leave it." Providing options allows your customers to choose what is right for them. The question is no longer "Will you buy THIS?" it now becomes "Which option would be the best fit for you?" The latter is far more powerful and leads to greater sales in almost all situations. As the price for your options increases, so too should the value that your customer will receive.

Anchoring. Another benefit of giving options to your customers is the ability to use price anchoring. Rather than seeing only one price option, your customers now see 2-3 options. If your original price point is $10,000 - your customer will form an impression about that. When you provide options of a) $35,000 b) $17,500 and c) $10,000 the $10,000 price is perceived as much lower because the customer is comparing that amount to the much higher $35,000 option.

Value. Justify the increase in price by delivering more value. The increase in value however does not require an increase in cost to the business owner. Hotels are a great example of this. A standard room may cost $185. The hotel offers a special package for $210 where you also receive fresh fruit upon your arrival, a free drink at the bar, late checkout and half-off a spa treatment. The total cost to the hotel is under $7. The additional $18 is easily justified in the mind of the customer because of the value they perceive in the additions. For a hotel with 40 bookings a day at this new package they will quickly generate an extra $164,250 in profit over the next 12 months.

Test Resistance. An increase or decrease in price is never set in stone. Your pricing, like your business will evolve over time. There are several reasons to test your pricing. They may include: never tested a price increase before; conversion rate is extremely high (suggesting that you're under-valuing your product or service); as well as sales are low (low sales of a product or service can also be caused by the market seeing your offering as inferior because of its low price). In each of these cases, start by increasing your pricing and gauge the reaction. If revenue increases, you've just got a raise and it's worthwhile considering raising prices again and testing. When revenue declines it's a sign that you've reached the threshold people are willing to pay, or that additional value needs to be communicated in order for the purchase at the higher price to be justified. The fear that customers will jump ship because of higher prices is unfounded. That rarely happens when you focus on delivering and communicating the value your product or service offers.

As Wayne Gretzky is famous for saying, "You miss 100 percent of the shots you don't take."

Increasing your prices is often the fastest way to grow revenue. With such little downside, it's a shot you need to take.

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